Interactive gaming and the law - Part 2: Game Up

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For convenience, gaming services have been grouped under four main headings: competitions, lotteries, betting and gaming. Each is regulated in a different way.

Competitions

'Competitions' take many familiar forms such as word puzzles, strategy games, games of dexterity and activities based on luck. Often competitors pay to enter - typically via a premium rate telephone call - and a prize fund is usually set aside by promoters to attract entrants. This sounds like a well-worn format, so what may make a competition illegal?

The Lotteries and Amusements Act 1976 renders unlawful any competition in which prizes are offered for:

• Forecasting the result of a future event
• Forecasting the result of a past event - the results of which are not generally known
• Any other competition in which success does not depend to a substantial degree on the exercise of skill.

Although the first two prohibitions seem self-explanatory, the line between legality and illegality is a thin one. For example, 'Fantasy Football' schemes - where competitors predict the performance of a team of football players - has been decided by a court not to involve 'forecasting the result of a future event'. Yet a fantasy 'Share Portfolio' scheme was considered to involve such a forecast. Concerning the third prohibition, however, it is less clear as to what is meant by a 'substantial degree of skill'

What is important here is not necessarily the amount of skill but that skill is the factor that determines success. Some form of 'mental process' is required in order for skill to be the determining factor in any competition and this must be more than simply an observation of a set of circumstances (such as matching colours or words for example).

Games requiring the dexterity of the competitors will usually render skill as the factor that determines success. It is important to note that if the eventual winner from, for example, three equal highest scores is decided by a draw, even though skill plays a part in whittling down the winners, the game will remain an illegal competition because skill will not have determined the winner.

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Lotteries

The word 'lottery' is not defined by statute, although it is generally considered to refer to schemes under which prizes are distributed by chance among entrants who have given some form of value for their chance to take part. The LAA renders illegal any lottery other than exceptions it specifies, (such as the National Lottery).

The 'value' may be in any form, such as a premium rate telephone line or the purchase price of any product. If there is no payment or value to enter, the scheme will fall outside the definition of a lottery - although relying on a 'no purchase necessary route' to take the scheme outside the description of a lottery as many promoters do is not always sufficient to render the scheme legal.

If success under the scheme is determined by an element of skill, the scheme will fall outside the definition of a lottery. The level of skill required is only small but it must not be insignificant. To ensure this, a tie-breaker is often used to separate winners who have the same answers to any competition. However, even with the introduction of a 'skill element' it is important to consider whether the scheme falls within the description of an 'illegal competition', 'fixed odds betting' or 'gaming'.

Fixed odds betting

With the advent of interactive TV, it is anticipated TV-based betting will increasingly become a leisure activity. Furthermore, it is forecast that iTV (interactive television) will account for half of an estimated €201bn online betting industry by 2015 - if the industry even approaches this sum, it is easy to appreciate the appeal of revenue sharing arrangements for rights owners wishing to enhance the value of their asset.

'Betting' is usually divided into two types: fixed odds betting and pool betting. As with lotteries, fixed odds betting is not defined by statute. Generally, if a gambler is able to establish what the return on a bet will be when it is placed, (and the activity is not 'gaming' see below)), then it is likely to be betting at fixed odds - the type of betting commonly provided via iTV services.

Licenses - Under the Betting, Gaming and Lotteries Act 1963 (BGLA), it is an offence for a business to accept a bet other than as a licensed betting shop or, in the case of bets received via the telephone, Internet or iTV, as a licensed bookmaker. The proper licensing authority will be the magistrate's court usually located in the area where the bookmaker has its registered office. For this reason, those taking bets as part of iTV betting services tend to be recognised bookmakers such as Blue Square or Ladbrokes who hold bookmakers' licenses as part of their business as matter of course.

Advertising - The Advertising Standards Authority's published Code of Advertising and Sales Promotion sets out guidelines on the way in which betting services may be advertised. In the UK for example, advertisements should not be directed to under 18s; no medium should be used to advertise betting services if more than 25 per cent of its audience is under 18 and, broadly, advertisements should be 'responsible'.

This voluntary code should be considered in the context of the BGLA, which creates the offence of publishing any advertisement for betting services unless published in a 'material form'. The prohibition is aimed at electronic, television and radio advertising and a 'material form' refers to the less pervasive media of paper, brick and wood. Advertising possibilities via iTV are thus extremely limited and this should be borne in mind when designing a betting service - the line between an advertisement and a navigational aid, for example, is a fine one and advice should be taken in each case.

The requirement to be licensed may be avoided by designing a game that retains the look and feel of a betting service, but which falls outside the BGLA's reach. A game under which players pay to enter, stake 'points' upon their skill-based performance and which results in the person accruing the most points wins a prize, may retain a 'betting feel' without being a 'betting activity' that requires licensing.

In this case the player is not making any 'wager', but is entering a competition in respect of which a prize is available and an entry charge is made. Unlike a fixed odds bet, the prize available will not depend on the amount paid to enter and the 'skill' element will take the competition outside the description of an illegal competition.

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Gaming

Gaming is defined as 'the playing of a game of chance for winnings in money or monies worth, whether any person playing the game is at risk of losing any money or monies worth or not' - the Gaming Act 1968 (GA). Each case must be considered individually to evaluate whether, in fact, a game is being played or whether that game is a 'game of chance', according to the legal understanding of these phrases.

There are a few hard and fast rules, however. A 'game of chance' does not include any athletic game or sport but any appreciable element of chance in a game - no matter how much skill is also involved - will render the game one of chance for the purposes of the GA. To constitute gaming, a degree of 'participation' or 'activity' by the players is required in deciding to whom winnings should be paid - the player's role cannot simply be passive.

The Gaming Board takes the view that gaming takes place at that location where a bet is accepted and processed; broadly, the GA renders illegal any gaming that takes place in the UK unless that gaming is on licensed premises. Section 12 of the GA prohibits anyone from participating in gaming unless that person is present on the licensed premises when the gaming takes place. Thus, so far, this largely prevents interactive gaming in the UK.

As might be assumed from the proliferation of Internet gaming operations, the GA does not prohibit participation in gaming from the UK if the bet is accepted abroad. With this in mind, some operators have considered offering gaming services from outside the UK to avoid the GA's reach. However, there are at least two reasons why moving an operation offshore may not necessarily succeed.

First, if gaming services are provided abroad but have repercussions in the UK. For example, if the iTV provider supplies navigational aids in the UK to reach the gaming service and also assembles players in the UK, the provider of those services may be liable under the GA.

Second, the GA creates an offence of issuing any advertisement that (amongst other things) invites the public to direct money for use in gaming activities whether in the UK or elsewhere. There is no restriction on responding to requests for information, however. Advertisements must simply constitute a notice that the services exist but must stop short of encouraging play - although the line between the two is obviously a thin one.

A suggested means of providing a casino style service without falling under the GA is to present a roulette style game in the form of a fixed odds betting game. If, in selecting a number, a player is in fact simply making a bet at fixed odds, the service could be offered under a bookmaker's licence and as such fall outside the definition of gaming. It seems that no games provider has taken this step to date and before committing to do so, it would be interesting to investigate whether the Gaming Board would show an interest in this style of service.

Some competitions and lotteries offered currently are, without doubt, illegal and the patience of the CPS is particularly tested by those illegal schemes that are large in scale and broad in their reach. Until changes in the law make these schemes legally acceptable, games creators and lawyers need to work closely to ensure that games both appeal to and excite the player without tempting the CPS to prosecute.

For more information visit: www.wiggin.co.uk

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